Keeping It Simple, Why Short Traders Are Losing Money This Week

One thing I have talked about several times which cannot be understated is
that is the tendency for investors to believe that complex trading ideas and
automated trading systems are better than simple, logical ones.

At first thought this notion is completely understandable. After all, if an
idea is fairly simple, how could it possibly be "a secret" and investors not
using it yet?

Successful trading and investing is not about how good you look or how impressive
you sound in videos. It's about what, when and how you do it. It does
not matter if you are placing the trades yourself or using an automated trading
system. What, when and how the investment is traded is all that matters.

It's known that highly intelligent people struggle with the markets because
they believe intelligence will improve their trading results. The reality is,
they do not thing simple trade setups and strategies that look like they will
make easy money, will work. Why? Because they think that the market is complex
and thus trades should not be simple to spot and time, therefore the simple
ideas should not work.

In all fairness "simple trading" is not really that simple. Successful trading
requires the right kind of simplicity, in the right amount at just the right
time. This is what creates the highly profitable investors and automated trading
systems.

Why The Short Traders Are Losing Money This Week

They are fighting a bull market which is still pointing to higher
prices.

Take a look at the chart below of the SP500 futures index. You will notice
the bars are color coded; this is done by my automated trading system which
identifies the market trend which trades should be trading in line with.

The stock market remains in a full blown bull market. Investors should remain
long for time being. On the other hand active investors should be trading with
the current market trend which is shown on the chart.

Market corrections within a bull market are sharp and short lived. As an active
investor you will be lucky to catch one or two short trades during these pullbacks
before the uptrend is retaken.

It is important to know that eventually one of these bull market corrections
will be the straw that breaks the camel's back, and kick starts a new bear
market. This is why I always move to cash and look to short each of these corrections.
We just never know WHEN a full blown bear market will start. If you are holding
your positions through these corrections and think you're a great investor,
just wait until the market does actually breakdown and most of your gains are
gone before you realize it. I will admit, its very easy to get lazy with investments
after years of rising prices. Laziness and a lack of a trading strategy for
a falling market is what causes 99% of investors to lose their money.

I believe in trading defensively. Sure it's more work, takes time to follow,
and there are extra trading commission fees, but it is a small price to pay
to keep the majority of your gains.

SP500 Monthly Big Picture Analysis

Here is the big picture and trend of the SP500 index. Simple fact is, eventually
things are going to get really ugly. By stepping back and looking at this chart,
it's clear the market must still fall substantially in value to break below
its critical support trend line and before we can confirm a true bear market
is in place.

Do you want to see your nest egg drop 20-30% before you decide to exit? Or
do you want to profit from this initial correction when it does happen, and
make even more money when the stock market drops for a year or two after taking
your account to new all-time highs.

Keep It Simple Conclusion

The good news is that if you keep things simple by following the intermediate
trend, like the color coded chart above, you can keep making money as the market
rises to ridiculous new highs, and avoid market corrections, and possibly even
profit from them.

In my next article I will show you a simple trading strategy
that I have used for many years to time stock market bottoms and tops for swing
trading. Best part is that the data I use is available online for free.

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized
market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while
reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and
investment newsletter service. Chris is responsible for market research and
trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors
around the world. He designed an automated algorithmic trading system for the
S&P 500 index which solves his client's biggest problem related to investing
in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows
individuals to investing using either exchange traded funds or the ES mini
futures contracts. It is supported by many leading brokerage firms including:

He is the author of the popular book "Technical
Trading Mastery - 7 Steps To Win With Logic." He has also been featured
on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe
Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and
dozens of other financial websites. His list of personal and professional
relationships approaches 25,000, people with whom he connects and shares
is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations
management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight
pilots license. He resides in the Toronto area with his wife Kristen and two
children.